Allocating fixed costs or resources and setting targets via data envelopment analysis

Abstract: In many applications of data envelopment analysis (DEA), there is often a fixed cost or input resource which should be imposed on all decision making units (DMUs). Cook and Zhu [W.D. Cook, J. Zhu, Allocation of shared costs among decision making units: A DEA approach, Computers and Operations Research 32 (2005) 2171–2178] propose a practical DEA approach for such allocation problems. In this paper, we prove that when some special constraints are added, Cook and Zhu’s approach probably has no feasible solution. The research of this paper focuses on two main aspects: to obtain a new fixed costs or resources allocation approach by improving Cook and Zhu’s approach, and to set fixed targets according to the amount of fixed resources shared by individual DMUs. When such special constraints are attached, our model is proved to be able to achieve a feasible costs or resources allocation. Numerical results for an example from the literature are presented to illustrate our approach. [Copyright &y& Elsevier]